Economy of Iceland
The economy of Iceland is small and subject to high volatility. In 2011, gross domestic product was US$12.3bn. With a population of 321,000, this is $38,000 per capita, based on purchasing power parity (PPP) estimates. The financial crisis of 2007-2010 produced a decline in GDP and employment, although the magnitude of this decline remains to be determined.
Iceland has a mixed economy with high levels of free trade and government intervention. However, government consumption is less than other Nordic countries. Geothermal power is the primary source of home and industrial energy in Iceland.
In the 1990s Iceland undertook extensive free market reforms, which initially produced strong economic growth. As a result, Iceland was rated as having one of the world's highest levels of economic freedom as well as civil freedoms. In 2007, Iceland topped the list of nations ranked by Human Development Index and was one of the most egalitarian, according to the calculation provided by the Gini coefficient.
From 2006 onwards, the economy faced problems of growing inflation and current account deficits. Partly in response, and partly as a result of earlier reforms, the financial system expanded rapidly before collapsing entirely in a sweeping financial crisis. Iceland had to obtain emergency funding from the International Monetary Fund and a range of European countries in November 2008. SectorsManufacturing
Iceland is the world's largest electricity producer per capita. The presence of abundant electrical power due to Iceland's geothermal and hydroelectric energy sources has led to the growth of the manufacturing sector. Power-intensive industries, which are the largest components of the manufacturing sector, produce mainly for export. Aluminium
Aluminium smelting is the most important power-intensive industry in Iceland. There are currently three plants in operation with a total capacity of over 800,000 mtpy, putting Iceland at 11th place among aluminium-producing nations worldwide. Fisheries
Fisheries and related sectors—in recent years labelled "the ocean cluster"—are the single most important part of the Icelandic economy, representing an overall contribution to GDP of 27.1% in 2011. Iceland is the second biggest fisheries nation in the North East Atlantic behind Norway, having overtaken the United Kingdom in the early 1990s. Since 2006, Icelandic fishing waters have yielded a total catch of between 1.1m and 1.4m tonnes of fish annually, although this is down from a peak of over 2m tonnes in 2003.
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